Sive Morten
Special Consultant to the FPA
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- 18,648
Fundamentals
(Reuters) Sterling rose by more than 1 percent against the U.S. dollar on Friday as traders evaluated whether the killing of pro-EU British Member of Parliament Jo Cox may alter the balance of opinion in Britain's referendum on European Union membership.
Cox was shot dead on Thursday, leading to the suspension of referendum campaigning.
Cox’s death increased speculation that Prime Minister David Cameron might push back the vote scheduled for June 23, or that it could boost the pro-EU "Remain" campaign, which in recent days had fallen behind the "Leave" camp in opinion polls.
“This is people adjusting positions because they don’t know what’s going to happen,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. “People are unwinding the ‘risk off’ trades for the most part.”
The pound tumbled earlier this week on concerns Britain would send a shockwave through global financial markets and European politics by voting to leave the 28-country bloc.
The pound was last up 1.06 percent against the dollar at $1.4350, up from Thursday's lows of $1.4010. It rose as high as $1.4387 on Friday, its highest in a week.
The yen held near its highest against the dollar in almost two years and the strongest against the euro in more than three years on Friday, after the Bank of Japan on Thursday held off from further easing monetary policy.
The yen has gained as investors see the Bank of Japan as running out of options to stimulate Japan's economy.
“What you are seeing is the market sort of testing the Bank of Japan, saying that we didn’t expect much and you delivered absolutely nothing,” said Steven Englander, global head of foreign exchange strategy at Citigroup in New York. “It’s a view of a central bank that just doesn’t have any effective tools to set a floor for its currency.”
The dollar last stood at 104.20 yen, after strengthening to 103.58 on Thursday.
Another focus for the market next week will be a ruling by Germany's Constitutional Court on June 21 on the emergency bond-buying plan devised by the European Central Bank during the financial crisis, which has the potential to upset the ECB's current money-printing program.
Federal Reserve Chair Janet Yellen will also appear before lawmakers in the U.S. House of Representatives on Wednesday to discuss monetary policy and the state of the economy.
So, guys, as Europes stands closer to Brexit voting, here is interesting analysis of Brexit sentiment by Amareos. It very rare when you will find analysis of some political event from the angle of sentiment.
Brexit: Simply Impossible…
…to ignore. Admittedly the title to this week’s comment is a bit of a tease, but in its entirety it is also true. The debate in the UK ahead of the June 23 EU referendum vote has generated a lot of heat but very little in the way of light and we tried very hard not to add to the cacophony. However, as evidenced by the significant impact recent movements in the opinion polls have had on GBP, it is clear that we need to revisit a topic that is, and will remain until June 24 at the very least, of paramount importance to investors both in the UK and beyond.
As we noted in our first comment on the UK referendum, published back in February, visibility on the likely outcome of the vote was poor. Between the various opinion poll results a high degree of variability has been observed, something that would not be particularly problematic if either side had a commanding lead. However, this is not the case. The difference between Remain and Leave has tended to be relatively small and almost always lower than the percentage of undecided voters (see exhibit below).
Source: www.FT.com
Despite several weeks of official campaigning this situation has not radically altered; neither side having managed to take a decisive lead. As a result, investors are faced with the impossible task of trying to incorporate a known binary risk event (In vs. Out), with outcomes that have radically different investment implications, but whose ex ante probability is constantly shifting around the 50% mark. Little wonder there is such extreme market sensitivity to opinion poll trends and anything that may shed some light on these trends is clearly valuable.
In this regard the sentiment data we track at Amareos have proved rather useful. The last piece we published on Brexit was entitled “Project Fear Is Working” – a demonstrably provable conclusion based on the surge in the GBP Fear indicator. An updated version of the exhibit we used to illustrate this point is included below. It clearly shows that since April 20, when the Fear index hit is highest possible level (100) there has been a marked decline and it currently stands around 50. While still elevated compared with the norm, it nevertheless points to a significant reduction in public perceptions of fear in relation to the EU referendum.
Exhibit 2: GBP Fear Index
Source: www.amareos.com
Logically there are two possible explanations for this shift in public perceptions of fear, a sentiment extracted using automated processes from millions of mainstream news and social media sources published on a daily basis.
One possibility is that Project Fear – as the Conservative-led Remain campaign has been dubbed – had been so effective that huge swathes of the UK electorate had made up their minds to vote to stay within the EU, thereby removing the underlying source of fear (Brexit). For this explanation to be credible though the abatement in GBP Fear should have been associated with a strong rise in support for Remain in the opinion polls – something that would have been evident even taking into consideration the high variability in poll results mentioned previously.
Referring back to Exhibit 1 above, until mid-May the polls did show a swing in favour of Remain but on nothing like the scale that the abatement in fear would have suggested. Moreover, subsequent polls suggest Remain’s lead has been eroded to almost nothing even as the GBP Fear index has continued to decline.
This brings us to the second possible explanation; the one we favour as highlighted by our daily tweet on June 1 (see exhibit below): Project Fear (AKA Operation Fear) was no longer effective.
Exhibit 3: Messaging PM Cameron
Source: www.amareos.com
This should have been deeply troubling for David Cameron because it suggested that scare tactics – the foundation of Remain’s campaign strategy – were not as effective as before. Even worse, they were likely becoming counterproductive because as the exhibit below illustrates, concomitant with the abatement of Fear anger towards the UK government started to ramp up. And, while the Remain campaign is ostensibly a cross-party initiative – and several cabinet members are in the Leave camp – it is Cameron’s government that is seen as its main driving force.
Exhibit 4: UK Sentiment – Government Anger
Source: www.amareos.com
Given the clear message from the sentiment data that voters were increasingly unhappy with Remain’s campaign tactics it is hardly surprising that the opinion polls since June 1 have seen their meagre lead over Leave vanish; a shift that as we mentioned in the introduction was the catalyst for renewed worries over Brexit and the trigger for GBP volatility.
So, with Project Fear no longer effective, anger towards the UK government rising and given the recent momentum in the polls favouring Leave does that mean that Brexit is becoming more likely than not? Perhaps not. There is one remaining hope for Remain – again, no pun intended.
Despite all of the economic “facts” that have been presented during the debate they really are only assumptions, or at best informed guesses as to what with happen in the event of Brexit. No one knows what will happen or how the rest of the EU will react, especially in terms of trade access, to such an eventuality. In fact, the lack of precedent means that such things are not just unknown but unknowable.
In the absence of facts that can be independently verified the eventual decision will be decided by something more emotive. Professor Daniel Kahneman, Nobel laureate and father of behavioural economics, this week expressed his concern that given this Brexit may well occur. Specifically he warned,
“The major impression one gets observing the debate is that the reasons for exit are clearly emotional….The arguments look odd: they look short-term and based on irritation and anger. These seem to be powerful enough that they may lead to Brexit.”
This may well prove to be true. However, it is also the case that given the unknowable consequences of Brexit voters will, in the end, have little choice but to make a judgement call based on which side they trust. And, of all the eight primary emotions we track Trust is still the predominate one in relation to GBP (see exhibit below).
Source: www.amareos.com
This suggests to us that even though scare tactics are no longer effective, and anger towards the UK government has increased, they have not lost the trust of the voting public. That said, if that were to occur during the final weeks of the referendum campaign then our only advice would be this: adopt the brace position!
*Sentiment Analytics are based on Thomson Reuters MarketPsych indices.
________________________________________________________________________________________
COT Report
Today guys we will talk on GBP again, because situation here is really interesting. First of all - take a look at CFTC data. Speculative short positions have been contracted signficantly. As you can see from the chart below - as net speculative short position as open interest has decreased. It means that investors have closed large part of shorts. As a result we have upside action on GBP.
Here we could only gamble what it could mean. Either this could mean that most investors expect "staying" result of voting, or this is just a reaction on murder of "staying EU" supporter. Or may be this is just calm assessement of voting results, that even Brexit will not have huge negative impact, if UK will stay in EU economy area....Whatever it will be, we should treat it as a bullish sign. Because as large amount of bearish positions were opened just week ago - what the reasons could be to close them just in 1 week? Especially, if voting has not happened yet...
It means that situaiton has changed. Whether this is prediction of results or not, but this is definitely the sign that we should not take shorts right now...
Technicals
Monthly
As you undertsand, guys, currently we're mostly interested in perspectives of 1-2 weeks, and Brexit results. Last week market has was shown absolutely different, opposite picture - as net shorts have increased strongly and GBP was on a south marche.
Terrible murder has changed situation drastically - shorts were closed and market bounced up. Still, monthly is really big picture and even 2 times greater action still will be a retracement. Today we will bring some new details here.
First we will repeat some old statements - as market recent time coiling around YPS1 - this barely made any impact on monthly chart. Some upward bounce but its scale insignificant for this time frame. Besides we do not have visible reasons and technical supports in area where this upside bounce has started – no AB-CD extensions, Fib levels, pivots etc. That’s why we treat this move as retracement yet and stand with our previous analysis on downward continuation in long-term perspective.
Long Term Forecast on GBP rate
Our long term analysis suggests first appearing of new high on 4th wave at ~1.76 level and then starting of last 5th wave down. First condition was accomplished and we’ve got new high, but it was a bit lower – not 1.76 but 1.72. This was and is all time support/resistance area. Now we stand in final part of our journey. According to our 2013 analysis market should reach lows at 1.35 area. Let’s see what additional information we have right now."
Trend is bearish here, GBP is not at oversold. On monthly chart we have two important patterns.
First one is uncompleted yet small AB-CD down. It amazingly agrees with huge AB-CD pattern, that has 0.618 target @ 1.3088 area. Since this is just minor 0.618 extension of huge pattern - sooner or later but market should hit it with high probability.
Second important moment here - GBP already has broken through all important supports - YPP, major 5/8 Fib support, natural supports of some former lows. Now it stands in an area of YPS1, but upside reaction looks mild and its already has dropped back to YPS1.
This leads us to conclusion that all time lows around 1.35 probably will not survive, despite how long they will hold price. Mostly because AB-CD targets stand right below it. If even market will not drop further - it will wash out lows. There is really high probability for this.
Finally, why we've decided to make an update on GBP view - take a look at June candle. It could become a bearish stop grabber and should initiate dropping below 1.39 lows. Yes, June has not closed yet and everything could change very fast on Brexit results, but right now we have a hint on bearish result of Brexit voting as market right now anticipates mostly "out" results.
Now I would like return back to discussion of this moment, with this grabber. We should not forget that this is only a "potential" grabber, because June candle has not closed yet. Thus, in fact, we do not have grabber yet and may be we will not get it at all, based on changes that we have right now.
The new tool that we apply today on monthly chart is harmonic swing. Yesterday, in daily video update we've got a hint on weekly bullish grabber that has potential target around 1.51 area. If we will take a look at monthly picture - we will see amazing agreement with YPP that has not been tested yet, by the way. And - upside harmonic swing.
At the same time, reaching of 1.51 will not change the quality of this action, it still will be a retracement. Staying in EU also will not change UK domestic problems and will not improve GBP value. Market will just price-out anticipated Brexit. That's being said, upside reaction on "staying" in EU will not have long-term impact on the market and will not break our long-term bearish view on GBP.
Weekly
On weekly chart stands most important information for us. First of all our reversal week has worked perfect, as market really has shown downward AB-CD action out from the top.
But currently, guys, we mostly are enquired with bullish grabber that was formed last week. This grabber in fact is technical reflection of ongoing process in public mind and political processes in UK. This is the pattern that has appeared as result of massive short covering. As a result, in addition to grabber, we have failure breakout of bullish flag. Take a look, initially it was broken down, but last week market has returned back into it.
Usually when such sort of action takes place - market breaks it in opposite direction and moves to distance that equals to mast of flag.
Thus, whatever result Brexit will give - current technical picture tells "don't be short". Not everybody likes to keep positions through turmoil, but if we wouldn't have any voting, I would say - we will search chances to go long here... But as voting stands on horizon - you will have to decide. High degree of uncertainty and political even that could break any technical picture... yes, risks are greater now.
Daily
Daily trend holds still bearish, but market is not at overbought. Although there is a lot of uncertainty in political sphere, technically picture looks very clear. Bears should not take position until price will not erase weekly grabber, i.e. drop below it's low, or until it completes target, at least above 1.48 area.
Bulls, if you do not scare of voting turmoil, situation is suitable for attempt to take a long position on some minor retracement down. But first, we want to talk more on targets. As you can see beyond the grabber we have 2 Fib extensions. THe first one is smaller and it's based on our H&S pattern and second on is big pattern.
So, if grabber will work - it should push price above 1.48 top. This in turn, will mean upside continuation based on AB-CD pattern. As all other targets of this pattern already have been hit - market could move only to last one - 1.51 Agreement resistance. This Fib extension coincides with weekly 5/8 Fib resistance level. That's why, as you can see this grabber is not just the one, but the pattern that could become a trigger for solid upside action. From that standpoint I even would say that this could become a technical prediction of Brexit voting results.
4-hour
Here our comments mostly will be useful for those who still think about take a risk and go long. Bears as we've said currently should avoid taking position since we have opposite pattern. Besides, GBP is jumping up from strong support area.
So, on a way up market has reached our broken triangle border and stopped on Friday, as we've said in our daily video update. Right now, we could expect minor bounce here. If market is really bullish, most probable that retracement will be mild, to WPP + 3/8 Fib level, because it's not at overbought on daily chart and no meaningful resistance stands above, except this line and may be minor levels.
Still, even 5/8 retracement to WPS1 will be OK, because invalidation point stands right at low. Upward setup will fail only if market drop below it. Besides, retracement to WPS1 may be even better, since it will significantly increase attractiveness in terms of risk/reward ratio.
So, guys, situation is really interesting, thus - think, decide...
Conclusion:
Recent upside action barely impacts long-term perspectives for GBP. Mostly it stands in relation to daily and intraday picture. Despite whether UK will stay in EU or out - it will not improve overall situation in British economy. It could stand as it is - at maximum or even become worse.
In short-term perspective we could treat differently current technical setup. May be this is just setup or may be this is technical prediction of voting results. Anyway, overall technical picture tells do not go short.
Currently we can't call you to go long, due significant risk level. But we we would have ordinary session we would say that situation is bullish.
The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
(Reuters) Sterling rose by more than 1 percent against the U.S. dollar on Friday as traders evaluated whether the killing of pro-EU British Member of Parliament Jo Cox may alter the balance of opinion in Britain's referendum on European Union membership.
Cox was shot dead on Thursday, leading to the suspension of referendum campaigning.
Cox’s death increased speculation that Prime Minister David Cameron might push back the vote scheduled for June 23, or that it could boost the pro-EU "Remain" campaign, which in recent days had fallen behind the "Leave" camp in opinion polls.
“This is people adjusting positions because they don’t know what’s going to happen,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. “People are unwinding the ‘risk off’ trades for the most part.”
The pound tumbled earlier this week on concerns Britain would send a shockwave through global financial markets and European politics by voting to leave the 28-country bloc.
The pound was last up 1.06 percent against the dollar at $1.4350, up from Thursday's lows of $1.4010. It rose as high as $1.4387 on Friday, its highest in a week.
The yen held near its highest against the dollar in almost two years and the strongest against the euro in more than three years on Friday, after the Bank of Japan on Thursday held off from further easing monetary policy.
The yen has gained as investors see the Bank of Japan as running out of options to stimulate Japan's economy.
“What you are seeing is the market sort of testing the Bank of Japan, saying that we didn’t expect much and you delivered absolutely nothing,” said Steven Englander, global head of foreign exchange strategy at Citigroup in New York. “It’s a view of a central bank that just doesn’t have any effective tools to set a floor for its currency.”
The dollar last stood at 104.20 yen, after strengthening to 103.58 on Thursday.
Another focus for the market next week will be a ruling by Germany's Constitutional Court on June 21 on the emergency bond-buying plan devised by the European Central Bank during the financial crisis, which has the potential to upset the ECB's current money-printing program.
Federal Reserve Chair Janet Yellen will also appear before lawmakers in the U.S. House of Representatives on Wednesday to discuss monetary policy and the state of the economy.
So, guys, as Europes stands closer to Brexit voting, here is interesting analysis of Brexit sentiment by Amareos. It very rare when you will find analysis of some political event from the angle of sentiment.
Brexit: Simply Impossible…
…to ignore. Admittedly the title to this week’s comment is a bit of a tease, but in its entirety it is also true. The debate in the UK ahead of the June 23 EU referendum vote has generated a lot of heat but very little in the way of light and we tried very hard not to add to the cacophony. However, as evidenced by the significant impact recent movements in the opinion polls have had on GBP, it is clear that we need to revisit a topic that is, and will remain until June 24 at the very least, of paramount importance to investors both in the UK and beyond.
As we noted in our first comment on the UK referendum, published back in February, visibility on the likely outcome of the vote was poor. Between the various opinion poll results a high degree of variability has been observed, something that would not be particularly problematic if either side had a commanding lead. However, this is not the case. The difference between Remain and Leave has tended to be relatively small and almost always lower than the percentage of undecided voters (see exhibit below).
Source: www.FT.com
Despite several weeks of official campaigning this situation has not radically altered; neither side having managed to take a decisive lead. As a result, investors are faced with the impossible task of trying to incorporate a known binary risk event (In vs. Out), with outcomes that have radically different investment implications, but whose ex ante probability is constantly shifting around the 50% mark. Little wonder there is such extreme market sensitivity to opinion poll trends and anything that may shed some light on these trends is clearly valuable.
In this regard the sentiment data we track at Amareos have proved rather useful. The last piece we published on Brexit was entitled “Project Fear Is Working” – a demonstrably provable conclusion based on the surge in the GBP Fear indicator. An updated version of the exhibit we used to illustrate this point is included below. It clearly shows that since April 20, when the Fear index hit is highest possible level (100) there has been a marked decline and it currently stands around 50. While still elevated compared with the norm, it nevertheless points to a significant reduction in public perceptions of fear in relation to the EU referendum.
Exhibit 2: GBP Fear Index
Source: www.amareos.com
Logically there are two possible explanations for this shift in public perceptions of fear, a sentiment extracted using automated processes from millions of mainstream news and social media sources published on a daily basis.
One possibility is that Project Fear – as the Conservative-led Remain campaign has been dubbed – had been so effective that huge swathes of the UK electorate had made up their minds to vote to stay within the EU, thereby removing the underlying source of fear (Brexit). For this explanation to be credible though the abatement in GBP Fear should have been associated with a strong rise in support for Remain in the opinion polls – something that would have been evident even taking into consideration the high variability in poll results mentioned previously.
Referring back to Exhibit 1 above, until mid-May the polls did show a swing in favour of Remain but on nothing like the scale that the abatement in fear would have suggested. Moreover, subsequent polls suggest Remain’s lead has been eroded to almost nothing even as the GBP Fear index has continued to decline.
This brings us to the second possible explanation; the one we favour as highlighted by our daily tweet on June 1 (see exhibit below): Project Fear (AKA Operation Fear) was no longer effective.
Exhibit 3: Messaging PM Cameron
Source: www.amareos.com
This should have been deeply troubling for David Cameron because it suggested that scare tactics – the foundation of Remain’s campaign strategy – were not as effective as before. Even worse, they were likely becoming counterproductive because as the exhibit below illustrates, concomitant with the abatement of Fear anger towards the UK government started to ramp up. And, while the Remain campaign is ostensibly a cross-party initiative – and several cabinet members are in the Leave camp – it is Cameron’s government that is seen as its main driving force.
Exhibit 4: UK Sentiment – Government Anger
Source: www.amareos.com
Given the clear message from the sentiment data that voters were increasingly unhappy with Remain’s campaign tactics it is hardly surprising that the opinion polls since June 1 have seen their meagre lead over Leave vanish; a shift that as we mentioned in the introduction was the catalyst for renewed worries over Brexit and the trigger for GBP volatility.
So, with Project Fear no longer effective, anger towards the UK government rising and given the recent momentum in the polls favouring Leave does that mean that Brexit is becoming more likely than not? Perhaps not. There is one remaining hope for Remain – again, no pun intended.
Despite all of the economic “facts” that have been presented during the debate they really are only assumptions, or at best informed guesses as to what with happen in the event of Brexit. No one knows what will happen or how the rest of the EU will react, especially in terms of trade access, to such an eventuality. In fact, the lack of precedent means that such things are not just unknown but unknowable.
In the absence of facts that can be independently verified the eventual decision will be decided by something more emotive. Professor Daniel Kahneman, Nobel laureate and father of behavioural economics, this week expressed his concern that given this Brexit may well occur. Specifically he warned,
“The major impression one gets observing the debate is that the reasons for exit are clearly emotional….The arguments look odd: they look short-term and based on irritation and anger. These seem to be powerful enough that they may lead to Brexit.”
This may well prove to be true. However, it is also the case that given the unknowable consequences of Brexit voters will, in the end, have little choice but to make a judgement call based on which side they trust. And, of all the eight primary emotions we track Trust is still the predominate one in relation to GBP (see exhibit below).
Source: www.amareos.com
This suggests to us that even though scare tactics are no longer effective, and anger towards the UK government has increased, they have not lost the trust of the voting public. That said, if that were to occur during the final weeks of the referendum campaign then our only advice would be this: adopt the brace position!
*Sentiment Analytics are based on Thomson Reuters MarketPsych indices.
________________________________________________________________________________________
COT Report
Today guys we will talk on GBP again, because situation here is really interesting. First of all - take a look at CFTC data. Speculative short positions have been contracted signficantly. As you can see from the chart below - as net speculative short position as open interest has decreased. It means that investors have closed large part of shorts. As a result we have upside action on GBP.
Here we could only gamble what it could mean. Either this could mean that most investors expect "staying" result of voting, or this is just a reaction on murder of "staying EU" supporter. Or may be this is just calm assessement of voting results, that even Brexit will not have huge negative impact, if UK will stay in EU economy area....Whatever it will be, we should treat it as a bullish sign. Because as large amount of bearish positions were opened just week ago - what the reasons could be to close them just in 1 week? Especially, if voting has not happened yet...
It means that situaiton has changed. Whether this is prediction of results or not, but this is definitely the sign that we should not take shorts right now...
Technicals
Monthly
As you undertsand, guys, currently we're mostly interested in perspectives of 1-2 weeks, and Brexit results. Last week market has was shown absolutely different, opposite picture - as net shorts have increased strongly and GBP was on a south marche.
Terrible murder has changed situation drastically - shorts were closed and market bounced up. Still, monthly is really big picture and even 2 times greater action still will be a retracement. Today we will bring some new details here.
First we will repeat some old statements - as market recent time coiling around YPS1 - this barely made any impact on monthly chart. Some upward bounce but its scale insignificant for this time frame. Besides we do not have visible reasons and technical supports in area where this upside bounce has started – no AB-CD extensions, Fib levels, pivots etc. That’s why we treat this move as retracement yet and stand with our previous analysis on downward continuation in long-term perspective.
Long Term Forecast on GBP rate
Our long term analysis suggests first appearing of new high on 4th wave at ~1.76 level and then starting of last 5th wave down. First condition was accomplished and we’ve got new high, but it was a bit lower – not 1.76 but 1.72. This was and is all time support/resistance area. Now we stand in final part of our journey. According to our 2013 analysis market should reach lows at 1.35 area. Let’s see what additional information we have right now."
Trend is bearish here, GBP is not at oversold. On monthly chart we have two important patterns.
First one is uncompleted yet small AB-CD down. It amazingly agrees with huge AB-CD pattern, that has 0.618 target @ 1.3088 area. Since this is just minor 0.618 extension of huge pattern - sooner or later but market should hit it with high probability.
Second important moment here - GBP already has broken through all important supports - YPP, major 5/8 Fib support, natural supports of some former lows. Now it stands in an area of YPS1, but upside reaction looks mild and its already has dropped back to YPS1.
This leads us to conclusion that all time lows around 1.35 probably will not survive, despite how long they will hold price. Mostly because AB-CD targets stand right below it. If even market will not drop further - it will wash out lows. There is really high probability for this.
Finally, why we've decided to make an update on GBP view - take a look at June candle. It could become a bearish stop grabber and should initiate dropping below 1.39 lows. Yes, June has not closed yet and everything could change very fast on Brexit results, but right now we have a hint on bearish result of Brexit voting as market right now anticipates mostly "out" results.
Now I would like return back to discussion of this moment, with this grabber. We should not forget that this is only a "potential" grabber, because June candle has not closed yet. Thus, in fact, we do not have grabber yet and may be we will not get it at all, based on changes that we have right now.
The new tool that we apply today on monthly chart is harmonic swing. Yesterday, in daily video update we've got a hint on weekly bullish grabber that has potential target around 1.51 area. If we will take a look at monthly picture - we will see amazing agreement with YPP that has not been tested yet, by the way. And - upside harmonic swing.
At the same time, reaching of 1.51 will not change the quality of this action, it still will be a retracement. Staying in EU also will not change UK domestic problems and will not improve GBP value. Market will just price-out anticipated Brexit. That's being said, upside reaction on "staying" in EU will not have long-term impact on the market and will not break our long-term bearish view on GBP.
Weekly
On weekly chart stands most important information for us. First of all our reversal week has worked perfect, as market really has shown downward AB-CD action out from the top.
But currently, guys, we mostly are enquired with bullish grabber that was formed last week. This grabber in fact is technical reflection of ongoing process in public mind and political processes in UK. This is the pattern that has appeared as result of massive short covering. As a result, in addition to grabber, we have failure breakout of bullish flag. Take a look, initially it was broken down, but last week market has returned back into it.
Usually when such sort of action takes place - market breaks it in opposite direction and moves to distance that equals to mast of flag.
Thus, whatever result Brexit will give - current technical picture tells "don't be short". Not everybody likes to keep positions through turmoil, but if we wouldn't have any voting, I would say - we will search chances to go long here... But as voting stands on horizon - you will have to decide. High degree of uncertainty and political even that could break any technical picture... yes, risks are greater now.
Daily
Daily trend holds still bearish, but market is not at overbought. Although there is a lot of uncertainty in political sphere, technically picture looks very clear. Bears should not take position until price will not erase weekly grabber, i.e. drop below it's low, or until it completes target, at least above 1.48 area.
Bulls, if you do not scare of voting turmoil, situation is suitable for attempt to take a long position on some minor retracement down. But first, we want to talk more on targets. As you can see beyond the grabber we have 2 Fib extensions. THe first one is smaller and it's based on our H&S pattern and second on is big pattern.
So, if grabber will work - it should push price above 1.48 top. This in turn, will mean upside continuation based on AB-CD pattern. As all other targets of this pattern already have been hit - market could move only to last one - 1.51 Agreement resistance. This Fib extension coincides with weekly 5/8 Fib resistance level. That's why, as you can see this grabber is not just the one, but the pattern that could become a trigger for solid upside action. From that standpoint I even would say that this could become a technical prediction of Brexit voting results.
4-hour
Here our comments mostly will be useful for those who still think about take a risk and go long. Bears as we've said currently should avoid taking position since we have opposite pattern. Besides, GBP is jumping up from strong support area.
So, on a way up market has reached our broken triangle border and stopped on Friday, as we've said in our daily video update. Right now, we could expect minor bounce here. If market is really bullish, most probable that retracement will be mild, to WPP + 3/8 Fib level, because it's not at overbought on daily chart and no meaningful resistance stands above, except this line and may be minor levels.
Still, even 5/8 retracement to WPS1 will be OK, because invalidation point stands right at low. Upward setup will fail only if market drop below it. Besides, retracement to WPS1 may be even better, since it will significantly increase attractiveness in terms of risk/reward ratio.
So, guys, situation is really interesting, thus - think, decide...
Conclusion:
Recent upside action barely impacts long-term perspectives for GBP. Mostly it stands in relation to daily and intraday picture. Despite whether UK will stay in EU or out - it will not improve overall situation in British economy. It could stand as it is - at maximum or even become worse.
In short-term perspective we could treat differently current technical setup. May be this is just setup or may be this is technical prediction of voting results. Anyway, overall technical picture tells do not go short.
Currently we can't call you to go long, due significant risk level. But we we would have ordinary session we would say that situation is bullish.
The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
